Stock Market Is Set Up....
Stock-Markets / Stock Markets 2012 Jan 05, 2012 - 03:34 AM GMTBy: Jack_Steiman
The market is set up to move higher. It doesn't mean it has to happen as planned, because, let's face it, folks, both the bulls and the bears have failed miserably in getting things done when they had their chances. There have been many chances for both sides, with the bears being the most recent group to mess up a good thing. They had the market buried with the move below 1225, but once that took place, it was churn time on diminishing volume, and that's all the bears could muster. The bears failed as the bulls took over, and have now worked the market back up to the breakout level, and beyond, for the moment, in a way that suggests somewhat higher prices ahead. Here's the set-up.
We broke out above 1267 yesterday, and did so into overbought short-term conditions on those 60-minute charts. It was natural to pull back some, but the key was to hold 1267 on any back test. The low today on the S&P 500 was 1268. They can't make it up. Perfect back test and hammer off the lows. A small inside day on decreasing volume off the back test sets the market up for higher prices short-term. No guarantee, as again, both sides have failed when they had chances, but this is as good a technical set-up as the bulls are going to see. If they can't do it here, you have to wonder how they'll ever be able to do so. They certainly won't get a better set-up on the S&P 500 chart, so now it's up to the bulls to seize on the market here for a ride up to 1292, and somewhat beyond.
In normal times I'd say the odds were extremely high that the bulls will get this done now. This isn't a normal market, unfortunately, so you can't get too excited, but you have to at least acknowledge what's in front of them, and how there really are no excuses left for not getting this market higher short-term. The bears recently had their chance, but let it slip away. Not quite the same strong set-up, but it was there for them. This is, basically, a perfect set-up, so we'll find out soon enough what we should expect from the bulls side of things. It's getting interesting.
There's an important distinction to make here between the moment, and the bigger picture stock market action. While things look better for the short-term, let's see if that actually takes place. This doesn't mean the market is set up for a big explosion higher bigger picture. It could be a very short-term move that gets knocked right back down over the weeks to come once the run is over. 1292, and then 1325, are key resistance levels. If the bulls were fortunate enough to get this market up to 1325, you shouldn't be shocked if that was the finality of the upside for quite some time. There's no way to know anything yet, conclusively, but I want to warn all of you about getting overly bullish should the short-term move take place as it's set up to do.
If we make this move, it's possible many of you will get overly bullish and start to make moves up, and as the numbers go up, do something that you'll regret later. Just continue to take things as they're presented to you, and leave the emotional stuff behind. Don't form an opinion that's unbreakable. Be open to all things at all times as that's the only way to survive in this crazy game. In the moment, the market gives a message. We all know how fast those moments can change over to a completely different message. Adapt and adjust as we move along, but never fall into the trap of emotional playing. You want the market to be what you want. Day by day is all you should ever think about.
When trying to understand a markets message, one thing you need to identify, is how the majority of leading stocks and leading sectors are performing over the short-term. Don't worry about where they've come from, but rather, where they are headed to. The set-ups in the vast majority of sector charts are looking far more bullish than bearish. The past few days have allowed many sectors that were on the bubble on how they would advance, either up or down, to look more favorable. MACD's are improving. Volume trends aren't bad at all. The oscillators are sitting on good spots. Price action and technical set-ups look better. Not all of them, but certainly a good portion of them.
In this insane market, it's very hard to trust anything you see. I am in favor of playing things far more cautiously than normal, because we haven't been able to trust on the level we'd all like to trust over the past eighteen months, or longer. All we can do is react to these set-ups, whether it's transports, retail, or even, dare I say it, financials, that look pretty good. Just remember, they've looked good before only to turn in a flash. That works both ways, bullish to bearish and bearish to bullish. In this moment, however, it is what it is, and it's far more favorable in the majority of sectors, than not, with leading stocks actually leading the way as they're supposed to do. It's good to at least see the leaders start to lead as that hasn't been the case for quite some time.
We've seen some good news come out on the economic front over the past few days, especially from Asia in terms of them saying the worst of their growth problems are behind them. This has helped the market overall along with our somewhat improving economic conditions as reports have clearly been more favorable, than not, although, not all of them have been anything worth celebrating. Markets don't usually need the very best of news to get moving higher. They can move up slowly as long as things are heading in the right direction.
Now, only Europe continues as the major headache, and make no mistake about it, it's a major league headache for not only the entire Eurozone, but the whole world. With that in tow, the S&P 500 is above key support still at 1267, and approaching resistance at 1292. Above 1292 is 1325. The Nasdaq has cleared 2625 resistance, which was trend line resistance. A nice break above, and back test that succeeded thus far. If we can hold above 2625, the bears will get antsy, and allow things to move along higher, especially if Apple Inc. (AAPL) clears massive gap top at 415. Watch Apple, and 415, for more market clues. Some long exposure seems appropriate. A ton of it does not, from either side of the ledger. Watch 1267/1292 for now for further insight as to the intentions of where we are going.
Peace,
Jack
Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.
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